YRC Sells Shares in Refinancing That Cuts Debt $300 MlnThomas Black
YRC Worldwide Inc. will have five years to focus on improving trucking operations and not fret over a debt burden that has kept management awake at night since the end of 2011, Chief Financial Officer Jamie Pierson said.
YRC raised $300 million yesterday to pay part of its $1.4 billion debt, including $69 million that matures in February, and will obtain two loans for $1.15 billion by the end of this month, Pierson said. The company, which sold $250 million of new shares and converted $50 million of bonds into stock, couldn’t make its debt payments in September without the refinancing.
“I don’t think anybody thought we’d be at this stage today,” Pierson said yesterday in a telephone interview. “We’ll have nothing but clear air and runway for us to focus in on operations for the next five years.”
The trucker was able to move ahead on its debt plan after union workers agreed on Jan. 26 to extend a labor contract into 2019 that retained a 15 percent wage cut and added new concessions worth about $70 million in cost savings. Creditors and investors had made the refinancing contingent on the extension and new givebacks.
YRC racked up $1.4 billion in debt from acquisitions and what Chief Executive Officer James Welch called “numerous missteps” before he took the top job in 2011. Losses have exceeded $3.1 billion since 2007, including an estimated adjusted loss of $102 million in 2013, after YRC’s deals made it the biggest U.S. trucker.
Since Welch and Pierson took over management of YRC, they worked out the refinancing plan and put three key dates on a white board -- the labor contract extension, the plan to issue new shares to pay debt and the bank loans.
The labor agreement didn’t come easy. YRC’s Teamsters workers rejected the first proposal, with 61 percent voting against it last month. The company negotiated a reworked version of the agreement that reduced the cost savings by $30 million, and it was approved on Jan. 26 with 66 percent of union workers in favor.
“Our approach was methodical and we’ve continued to knock down every single hurdle that we inherited,” Pierson said. “This is an incredible day for the company.”
YRC announced yesterday that it sold new common shares at $15 each and converted bonds into stock. On Jan. 28, the company began marketing a $700 million loan and a $450 loan backed by accounts receivable.
Pierson said he expected the two loans to be completed by the end this month, which will conclude the refinancing and save YRC as much as $50 million on annual interest payments.
“This is a traditional bank loan,” Pierson said. “It’s no different than anybody else’s, so you launch and you close two or three weeks later.”
YRC, which operates about 15,000 trucks, will be able to concentrate on competing for customers and can begin to invest in equipment and technology to grow, Pierson said.
“We’re going to work every single day to get better,” he said. “At the end of February, we’ll have five years to prove ourselves.”